UNITED STATES SECURITIES ANDEXCHANGE COMMISSION  Washington, D.C. 20549FORM 10-QSB[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934

For the quarterly periodended June 30, 2001Commission file number: FINITY HOLDINGS, INC. --------------------------------------- (Name of small business issuer specified in its charter)State or other jurisdiction of incorporation or organization: DelawareI.R.S. Employer Identification No.: 11-32107921157 North 5th Street, Abilene, Texas 79601 (Address of principal executive offices, including zip code)510-666-1214 ---------------------------(Issuer's telephone number, including area code)

(Former name, former addressand former fiscal year, if changed since last report)

Check whether the issuer: (i)filed all reports required to be filed by Section 13 or 15(d) of the ExchangeAct during the past 12 months (or for such shorter period that the registrantwas required to file such reports), and (ii) has been subject to such filingrequirements for the past 90 days. Yes [X] No [  ]

The number of shares outstanding of theissuer's Common Stock as of June 30, 2001 was 49,511,512 shares.

Transactional Small Business DisclosureFormat (Check one): Yes [  ] No [X]

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

```
   FINITY HOLDINGS, INC. AND SUBSIDIARIES
   Consolidated Balance Sheets - Unaudited
```

```
                                                    June 30         December 31
Assets                                                 2001                2000
                                                    -------             -------
Current assets
   Cash and cash equivalents                        $ 8,208         $ 1,899,945
   Interest bearing deposits with banks                   -             300,000
   Accounts receivable, net                         200,000           2,246,179
   Prepaid expenses and other assets                      -             848,237
                                                    -------             -------
      Total current assets                          208,208           5,294,361
```

```
Premises and equipment                                    -           1,823,390
   Less accumulated depreciation                          -             937,793
                                                    -------             -------
   Net property and equipment                                           885,597
```

```
Other assets
   Deferred tax asset                                     -              47,467
   Other assets                                           -              90,000
                                                    -------             -------
      Total other assets                                  -             137,461
                                                    -------             -------
          Total assets                            $ 208,208         $ 6,317,419
                                                    =======             =======
```

```
Liabilities and Shareholders' Equity
```

```
Liabilities
Accounts payable                                $   101,824         $ 3,944,437
   Accrued expenses & other liabilities                   -             786,965
   Current portion of note
   payable-American State Bank                            -             128,021
Notes payable-related party                          93,732             850,000
   Accrued interest payable                               -                   -
                                                    -------             -------
Total current liabilities                           195,556           5,709,423
```

```
Shareholders' equity
  Common stock, $.001 par value;
  50,000,000 Shares authorized;
  49,511,512 outstanding at June
  30, 2001; 50,511,512 shares
  outstanding at December 31, 2001                    49,512             50,512
  Additional paid-in capital                       8,379,096          8,379,096
  Accumulated deficit                             (8,415,956)        (7,821,612)
                                                     -------            -------
   Total shareholders' equity                         12,652            607,996
                                                     -------            -------
Total liabilities and
shareholders' equity                               $ 208,208       $  6,317,419
```

```
The accompanying notes are an integral
part of these consolidated financial statements.
```

```
FINITY HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Income Statements - Unaudited
```

```
                                       For the Three Months           For the Six Months
                                               Ended June 30,             Ended June 30,
                                       2001           2000           2001          2000
                                      -------------------------------------------------
Revenue
   Credit card revenue              $ 337,271     $ 311,214      $ 710,967     $ 600,830
   Mail operations revenue              3,670        10,156         24,550        22,498
   Merchant processing fees            25,943       216,809        236,768       510,692
   Other                                2,054            57          2,940           293
                                     --------        --------     --------      --------
Total operating revenue               368,938       538,236        975,225     1,134,313
```

```
Expenses
   Salaries and employee benefits     363,944       769,674        970,831     1,516,377
   Equipment and software  lease      279,417       432,275        580,501       864,224
   Facilities rent                     40,770        71,371        101,925       142,743
Repairs and maintenance                48,772        93,209        124,470       176,152
Depreciation                           56,037        82,181        140,181       164,224
Computer and office supplies           10,151        32,013         19,526        60,299
Telephone                              41,573        86,747        108,941       169,053
Professional and outside services      68,989       124,813        212,397       253,722
Travel and entertainment                9,412        49,921         19,031        99,355
Loss on writedown of investment        90,000             -         90,000             -
Other operating expenses              103,533       151,874        198,225       305,799
                                     --------      --------       --------      --------
Total expenses                      1,112,598     1,894,078      2,567,028     3,751,948
                                     --------      --------       --------      --------
```

```
Loss from operations                 (743,660)   (1,355,842)    (1,590,803)   (2,617,635)
```

```
Other income (expense)
Interest income                        1,217         10,822          7,050        20,136
   Interest expense                  (33,606)       (41,611)       (68,789)      (53,568)
                                    --------        --------      --------      --------
Total other income (expense)         (32,389)       (30,789)       (61,739)      (33,432)
                                    --------        --------      --------      --------
```

```
Loss before tax                     (776,049)    (1,386,631)    (1,652,542)   (2,651,067)
```

```
Income tax expense                    47,461              -         47,461             -
                                    --------        --------      --------      --------
```

```
Net loss before
extraordinary item                  (823,510)   (1,386,631)    (1,700,003)   (2,651,067)
```

```
Extraordinary item - gain
  on sale of subsidiaries          1,105,659             -      1,105,659             -
                                    --------      --------       --------      --------
```

```
Net income (loss)                 $  282,149   $(1,386,631)    $ (594,344)  $(2,651,067)
                                    ========        ========     ========      ========
```

```
Loss per share before extraordinary item
  Basic                          $      (0.02)  $     (0.04)   $    (0.03)  $     (0.07)
  Diluted                               (0.02)        (0.03)        (0.03)        (0.06)
```

```
Earnings (loss) per share
  Basic                                  0.01         (0.04)        (0.01)        (0.07)
  Diluted                                0.01         (0.03)        (0.01)        (0.06)
```

```
The accompanying notes are an integral
part of these consolidated financial statements.
```

```
FINITY HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Shareholders' Equity - Unaudited
```

```
                                   Common Stock
                                 -----------------     Paid-In     Accumulated
                                  Shares     Amount     Capital       Deficit       Total
                                 -------   -------     -------      --------     -------
```

```
Balance - December 31, 1999    38,511,512  $ 38,512  $5,891,096   $(3,162,150) $2,767,458
```

```
Net loss                                -         -           -    (4,659,462) (4,659,462)
Issuance of common stock       12,000,000    12,000   2,488,000             -   2,500,000
                                 -------   -------     -------      --------     -------
Balance - December 31, 2000    50,511,512    50,512   8,379,096    (7,821,612)    607,996
```

```
   Net loss                             -         -           -      (594,344)   (594,344)
   Common stock retired        (1,000,000)   (1,000)          -             -      (1,000)
```

```
Balance - June 30, 2001        49,511,512   $ 49,512 $8,379,096   $(8,415,956) $   12,652
                                  =======    =======    =======      ========     =======
```

```
The accompanying notes are an integral
part of these consolidated financial statements.
```

```
FINITY HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows - Unaudited
```

```
                                            For the Three Months        For the Six Months
                                                  Ended June 30,             Ended June 30,
                                          2001           2000           2001          2000
                                        -------------------------------------------------
Cash flows from operating activities
Net income (loss)                        $282,149    $(1,386,631)   $(594,344) (2,651,067)
Adjustments to reconcile net
income to net cash provided
by operations
    Depreciation and amortization          56,036         38,222      140,180     164,224
    Deferred income tax expense            47,461              -       47,461           -
    Gain on the sale of subsidiaries   (1,105,659)             -   (1,105,659)          -
    Loss on writedown of investment        90,000              -       90,000           -
    (Increase) decrease in
       Accounts receivable              1,381,210        (25,208)   1,461,395    (184,315)
       Prepaid expenses and
       other assets                        87,846         14,616      119,234     (81,416)
    Decrease in
      Accruals and accounts payable    (1,456,644)    (1,726,268)    (354,496)   (333,660)
                                          -------        -------      -------      -------
Net cash provided by
    (used in) operating activities       (617,601)    (3,085,269)    (196,229) (3,086,234)
```

```
Cash flows from investing activities
   Purchase of fixed assets                     -              -       (77,940)    (4,967)
   Proceeds from sale of fixed assets           -         40,917             -     40,917
   Proceeds from interest bearing deposit       -              -       200,000          -
   Sale of subsidiaries,
   net of cash sold                     (858,747)              -      (858,747)         -
                                         -------         -------       -------    -------
Net cash provided by
(used in) investing activities          (858,747)         40,917      (736,687)    35,950
```

```
Cash flows from financing activities
   Payments on lines of credit,
   net of proceeds                    (1,301,048)       (504,372)     (958,821)     (1,885)
   Proceeds from the sale of stock             -       2,000,000             -   2,000,000
Net cash provided by
(used in) financing activities        (1,301,038)      1,495,628      (958,821)  1,998,115
                                         -------         -------       -------     -------
```

```
Net decrease in cash
and cash equivalents                 (2,777,396)     (1,548,724)    (1,891,737) (1,052,169)
```

```
Cash and cash equivalents
at beginning of period                 2,785,604      2,630,295      1,899,945   2,133,740
                                         -------        -------        -------     -------
```

```
Cash and cash equivalents
at end of period                     $     8,208    $ 1,081,571     $    8,208  $1,081,571
                                         -------        -------        -------     -------
```

```
Supplemental disclosure of
cash flow information
Interest paid                          $  12,211    $     1,887   $   15,886    $   24,293
```

```
The accompanying notes are an integral
part of these consolidated financial statements.
```

NOTE 1: Summary of Significant AccountingPolicies

Principles of Consolidation

The accompanying consolidated financialstatements include the accounts of Finity Holdings, Inc. ("we", or"the Company") and the results of operations and cash flows for itswholly-owned subsidiaries, Finity Corporation ("Finity Private") andFi-Scrip, Incorporated ("Fi-Scrip"), through May 31, 2001. As morefully described in Note 2, the Company sold all of the outstanding stock of bothsubsidiaries effective June 1, 2001. Intercompany accounts and transactions havebeen eliminated.

Organization and Nature of Operations

Finity Holdings was organized under thelaws of the State of Delaware on February 5, 1993. The Company completed aprivate offering of its common stock in November 1993.

Finity Private was incorporated on October21, 1983, pursuant to the provisions of the Texas Business Corporation Act.Finity Private's business activities include the processing of credit cardpurchases for numerous businesses in various industries throughout the UnitedStates and data processing for various banks.

Fi-Scrip, a Nevada corporation, engages inthe financial services business by marketing computer processing services forautomated teller machines transactions, debit terminal transactions andelectronic benefits transfer system transactions. Fi-Scrip contracts withmerchants and independent service organizations for deployment of terminals andservices.

Management Representation

Management believes the financialstatements include all adjustments necessary in order to present a fairpresentation and ensure that the financial statements are not misleading.

Per Share Data

In February 1997, Statement of FinancialAccounting Standards (SFAS) No. 128, Earnings Per Share was issued. Under SFAS128, net earnings per share (EPS) are computed by dividing net earnings by theweighted average number of shares of common stock outstanding during the period.SFAS 128 replaces fully diluted EPS, which the Company was not previouslyrequired to report, with EPS, assuming dilution. The Company adopted SFAS 128effective December 31, 1998. The effect of this accounting change on previouslyreported EPS data is not significant.

The computation of basic earnings (loss)per share of common stock for the three months and six months ended June 30,2001 is based on weighted average shares outstanding 50,181,842 and 50,345,766,respectively. No potential common shares existed in the three months and sixmonths ended June 30, 2001; therefore, basic loss per share equals diluted lossper share in those periods. The computation of basic earnings (loss) per shareof common stock for the three months and six months ended June 30, 2000 is basedon weighted average shares outstanding of 38,566,457 for both periods. Thecomputation of diluted earnings (loss) per share of common stock for the threemonths and six months ended June 30, 2000 is based on weighted average number ofshares and equivalent shares outstanding 44,452,975 for both periods.

NOTE 2: Extraordinary Item - Sale ofSubsidiaries

On June 5, 2001, the Company completed thesale of all of the outstanding capital stock of the Company's wholly ownedsubsidiaries, Finity Private and Fi-Scrip, (the Target Companies), to Rationale,Inc., a Nevada corporation (Rationale) (the Transaction), for the considerationand upon the terms as set forth in the Stock Purchase Agreement dated as of June1, 2001 by and between the Company and Rationale (the Stock Purchase Agreement).For more information, please see our 8-K filed on July 16, 2001.Pursuant to the Stock Purchase Agreement, the Company received as considerationfor the Transaction a non-negotiable promissory note due and payable on October1, 2001 for $200,000. The consideration exchanged by the parties was negotiatedat arms length between the Company and Rationale.

In accordance with the terms of the StockPurchase Agreement, Rationale further agreed to (i) pay the Company theaggregate amount of $1,000,000, to be used to pay the Target Companies' tradepayables, (ii) loan the Target Companies, for a period of time concluding onOctober 1, 2001, an amount equal to the difference between the Target Companiescurrent ordinary and necessary expenses and operating revenue, to the extent theTarget Companies current ordinary and necessary business expenses exceedoperating revenue, on an aggregate basis, and (iii) contribute capital to Finityin the amount of $250,000, to be used to pay certain obligations pursuant to asoftware license agreement.

Prior to the consummation of theTransaction, CNG Financial Corporation (CNG), owner of 67% of the outstandingcommon stock of the Company (Shareholder), in addition to an equity investmentof $5.0 million, the Shareholder had made several loans to the Company in theaggregate amount of $1,317,402 (the Shareholder Loans). The Company used theproceeds of the Shareholder Loans to make inter-company loans to Finity and Fi-Scripin amounts of $1,032,402 and $285,000 respectively to fund the Target Companies'operations.

In connection with the terms of theTransaction, the Shareholder purchased a convertible promissory note in theamount of $1,032,402 from Finity and a convertible promissory note in the amountof $285,000 from Fi-Scrip (the Convertible Notes). Finity and Fi-Scrip used theproceeds from the sale of the Convertible Notes to repay their respectiveinter-company obligations to the Company. The Company then paid the Shareholderthe $1,317,402 due and payable under the Shareholder Loans. The ConvertibleNotes each have a term of five years, and bear interest at the rate of 10% perannum payable in quarterly installments. Each of the Convertible Notes isconvertible after June 1, 2002 into a 50% equity interest in the TargetCompanies on a fully diluted basis.

The gain on sale of the outstanding sharesof Finity and Fi-Scrip, reflected as an extraordinary item in the accompanyingfinancial statements, was computed as follows on June 1, 2001:

Noninterest-bearing note receivable dueOctober 1,2001                        $ 200,000 Cash paid to Finity Corporation prior to May 31,2001                            250,000                                                                                  -------   Totalconsideration                                                           450,000

Investment in stock of FinityPrivate                                        (4,136,460) Advances to FinityPrivate                                                     3,698,832 Investment in stock of Fi-Scrip                                                 (398,590)Advances to Fi-Scrip                                                             182,559                                                                                 -------      Total accounting basis insubsidiaries                                     (655,659)                                                                                 -------Extraordinary item - gain on the sale ofsubsidiaries                        $ 1,105,659

NOTE 3: Income Taxes

The Company files a consolidated federalincome tax return; however, federal income taxes are allocated between theCompany and its subsidiaries based on statutory rates. The federal income taxreturn filed by the Company will include the operations of the subsidiariesthrough May 31, 2001. The terms of the Stock Purchase Agreement described inNote 2 include an allocation of substantial net operating losses to thesubsidiaries sold. The tax basis of the subsidiaries sold is substantiallygreater than the accounting basis due to the previous write-off of goodwill forfinancial reporting purposes in the year ended December 31, 1999. Accordingly,the Company expects that no liability for federal income taxes exists at June30, 2001. The Company has determined that net operating losses unallocated andremaining with the Company are unlikely to be fully utilized; therefore, nodeferred tax assets are included in the accompanying financial statements withrespect to those losses.

NOTE 4: Related Party Transactions

In June 2001, the Company issued promissorynotes to CNG, the Company's primary shareholder, in the principal sum of$20,000. The noninterest-bearing note is due on October 2, 1001. The note hasnot been discounted in the accompanying financial statements to reflect a belowmarket rate due to the short term of the note.

In June 2001, the Company issued promissorynotes to certain directors of the Company in satisfaction of director's feespayable as of May 31, 2001. The noninterest-bearing notes are due on October 2,1001. The notes have not been discounted in the accompanying financial statementsto reflect a below market rate due to the short term of the note.

For the three months and six months endedJune 30, 2001, revenue from CNG, the Company's primary shareholder, accountedfor approximately $51,509 and $184,733 or 8% and 15% of the Company's totalrevenue, respectively. Expenses billed to the Company by CNG amounted to $88,921and $94,233 for the three and six month periods ended June 30, 2001,respectively.

Subsequent to June 30, 2001, CNG agreed toassume certain liabilities of the Company relating to legal expenses amountingto $31,891. These expenses, incurred in the six months ended June 30, 2001, havebeen reversed from operating expenses in the accompanying financial statements.

The Company entered into an agreement withGary K. Jennings, the Company's interim president, to negotiate with a businessentity for a business combination with the Company. The terms of the agreementspecify certain compensation to Jennings upon successful sale of the Companywithin 12 months.

NOTE 5: Subsequent Events

We are a defendant in a lawsuit entitledEric Grant v. Douglas R. Baetz, Glenn M. Gallant, Columbia Capital Corp. (ourpredecessor in interest), First Indecent Computers and Does 1-100, Case No.00-CV01527-J(BEN) in the Federal District Court for the Southern District ofCalifornia. On July 13, 2001, the Court entered and Order Granting Defendant'sMotion to Dismiss with Prejudice for Failure to Prosecute in the case. Pursuantto the terms of the Order, Plaintiff's class action lawsuit was dismissed withprejudice based upon the failure to prosecute and plaintiff's inaction andfailure to comply with the Court's Order to serve an amended complaint upon thedefendants by March 23, 2001. This would have ended the litigation, except thatin early August of 2001, Plaintiffs in this case submitted a Motion forReconsideration of the ruling on the Motion to Dismiss. We expect a ruling onthe Motion for Reconsideration in mid September 2001.ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

This report, including the disclosuresbelow, contains certain forward-looking statements that involve substantialrisks and uncertainties. Unless the context otherwise requires, the term"Company" refers to Finity Holdings, Inc. and its formerlywholly-owned subsidiaries, Finity Private and Fi-Scrip, through which theCompany principally conducted its business operations until May 31, 2001. Whenused herein, the terms "anticipates," "expects,""estimates," "believes" and similar expressions, as theyrelate to the Company or its management, are intended to identify suchforward-looking statements. The Company's actual results, performance orachievements may differ materially from those expressed or implied by suchforward-looking statements. Factors that could cause or contribute to suchmaterial differences include inability to replace lost business, inability togenerate sufficient additional capital, consolidation of banks and otherfinancial institutions, government regulation, competition and various otherfactors discussed in this report and in the Company's Annual Report on Form10-KSB for the year ended December 31, 2000.

OVERVIEW OF PRESENTATION

The following should be read in conjunctionwith our Consolidated Financial Statements which appear above. Furthermore, wefiled two 8-K documents during the month of July, 2001.

The Company has included in this Report theunaudited consolidated financial statements of the Company for the three (3)months ended June 30, 2001 and 2000, which include the consolidated balancesheets of the Company as of June 30, 2001 (unaudited) and December 31, 2000(audited), and the related consolidated income statements and statements ofchanges in shareholders' equity and cash flows for the three (3) month periodsended June 30, 2001 and 2000. The consolidated income statements and statementsof cash flows of the Company for the three (3) months ended June 30, 2001 and2000, which form a part of the Company's consolidated financial statements forsuch periods, reflect the consolidated results of operations and cash flows ofthe parent holding company, Finity Private and Fi-Scrip.

PLAN OF OPERATION

We were organized under the laws of theState of Delaware on February 5, 1993. We formerly operated through twowholly-owned subsidiaries, Finity Private and Fi-Scrip. We sold all of our stock inFinity Private and Fi-Scrip effective June 1, 2001. The sale of these twosubsidiaries leaves us without any significant operations. 

We do not plan to have any significantoperations in the next 12 months. We do not plan any research and development,nor do we expect to make significant purchases or sale of any assets. Currently, Finity has oneemployee, Gary K. Jennings, who is serving as interim President. We do not expect any change in the number of employees.

Finity is a shell corporation, and we areseeking an acquisition candidate. We will attempt, over the next three months tonegotiate our payables.

MANAGEMENT'S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS

Because we have ceased operations and soldoff our operating subsidiaries, our recent operating history offers little or noguidance with respect to our financial performance in the future. Because wehave no significant operations, we do not expect to have any revenues in thenext twelve months. Nor do we expect to have significant operating expenses inthe next twelve months except for compensation for the interim president andlegal and accounting expenses. We have current liabilities of $195,556, andcurrent assets of $208,208. Therefore, because we have minimal operations,we can satisfy our cash requirements for four to six months. When our cash isexhausted, we will either need to raise additional funds or cease alloperations.

There are uncertainties that may have amaterial impact upon our liquidity. Specifically, shareholders Douglas Baetz andGlenn Gallant have advised us through their attorney that they expect to bringan action against the company. They have failed, however, to fully articulatethe nature of their claims. If these shareholder bring such a claim, we will beunable to defend the action and will likely need to cease all operations. Wehave no internal or external sources of liquidity, except a note receivable for$200,000.

 

FINITY HOLDINGS, INC.

Dated: August 22, 2001 By:

 

/s/------------------------------- Gary Jennings, President

Dated: August 22, 2001 By:

 

/s/------------------------------- Scott McDonald, Accoun

tant